GOVERNMENT OF PAKISTAN

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Islamabad, the 22nd September, 2005.

NOTIFICATION

S.R.O. (I)/2005.- The following draft of Employees’ Provident Fund

(Investment in Listed Securities) Rules, 2005, proposed to be made by Securities
and Exchange Commission of Pakistan in exercise of the powers conferred by
section 227 read with section 506 of the Companies Ordinance, 1984 (XLVII of
1984), and section 43 of the Securities and Exchange Commission of Pakistan
Act, 1997 (XLII of 1997), is hereby published, as required by proviso to sub-
section (1) of section 506 of the said Ordinance, for the information of all persons
likely to be affected thereby, and notice is hereby given that the draft will be taken
into consideration after fourteen days of its publication in the official Gazette.
Any objection or suggestion which may be received in respect of the said draft
before the expiry of the aforesaid period shall be considered by Securities and
Exchange Commission of Pakistan.

EMPLOYEES’ PROVIDENT FUND (INVESTMENT IN LISTED

SECURITIES) RULES, 2005
1. Short title and commencement.— (1) These rules may be called the
Employees’ Provident Fund (Investment in Listed Securities) Rules, 2005.
(2) They shall come into force at once.

2. Interpretation.— In these rules, all the words and expressions used shall
have the same meanings as are assigned to them in the Companies
Ordinance, 1984 (XLVII of 1984), and the Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003.

3. Conditions for investment in listed securities, etc.—Where it is decided

to make investment, out of the provident fund constituted for the
employees of a company, in securities of the companies listed on any
 stock exchange in Pakistan, such investment shall be subject to the
following conditions, namely :-

(i) total investment in listed securities shall not exceed thirty

per cent of the provident fund;
(ii) investment in shares or other listed securities of a particular
company shall not exceed five per cent of its paid up
capital;
(iii) in case of investment in the shares of listed companies, it
shall be made only where such companies,—
(a) have a minimum operational record of five years;
and
(b) have exhibited return on equity 25% higher than the
last auction cut-off rate of 5-year PIB;
(iv) in case of investment in securities other than shares of
listed companies, it shall not be made unless such securities
have been rated as an investment grade with minimum
rating of “BBB” by a credit rating company registered with
the Commission under the Securities and Exchange
Ordinance, 1969 (XVII of 1969), and the rating is
maintained as such at the time of investment; and
(v) investment shall not be made in a security if it is publicly
known that the issuer of the security has committed default
while availing of any financing facility.

4. Conditions for investment in listed unit trusts schemes.— Employees’

provident funds to be invested in listed unit trusts schemes registered
under Non-Banking Finance Companies (Establishment and Regulation)
Rules, 2003, shall be subject to the following conditions namely :-

(i) that the total investment in unit trust schemes [registered

under Non-Banking Finance Companies (Establishment
and Regulation) Rules, 2003] shall not exceed fifty per cent
 of the provident fund which includes the limit prescribed in
condition (i) of rule 3;
(ii) that the total investment in any one unit trust scheme
[registered under Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003] shall not
exceed twenty per cent of the provident fund;
(iii) that the Employees’ Provident Fund shall ensure that
investment in unit trusts schemes registered under Non-
Banking Finance Companies (Establishment and
Regulation) Rules, 2003 shall be in conformity with the
above mentioned conditions, by 30th September, 2005; and
(iv) in the case of investment in unit trust schemes [registered
under Non-Banking Finance Companies (Establishment
and Regulation) Rules, 2003] shall not be made unless the
funds of such schemes have a minimum performance rating
of “A” by a credit rating company registered with the
Commission under the Securities and Exchange Ordinance,
1969 (XVII of 1969), and the rating is maintained as such
at the time of investment.

5. Conditions for investment in closed end fund schemes.— Employees’

provident funds to be invested in listed closed-end fund schemes
registered under the Non-Banking Finance Companies (Establishment and
Regulation) Rules, 2003, shall be subject to the following conditions,
namely :-

(i) that the closed-end fund is an index fund.

Explanation.- For the purposes of these rules, index fund
is a scheme authorized under Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003, by
which certificates are sold to retail investors who have a
principal objective to track, replicate or correspond to an
index on equities, debts or other securities, with an aim of
 providing or achieving investment results or returns that
closely match or correspond to the performance of the
index;
(ii) that the total investment in index funds, a scheme
authorized under closed-end fund registered under Non-
Banking Finance Companies (Establishment and
Regulation) Rules, 2003 shall not exceed ten per cent of the
provident fund which includes the limit prescribed in
condition (i) of rule 3 and condition (i) of rule 4;
(iii) investment in index fund shall not exceed five per cent of
its paid up capital;
(iv) investment in index fund would only be made where it has
exhibited return on equity 25% higher than the last auction
cut-off rate of 5-year PIB;
(v) in the case of investment in index fund registered under
Non-Banking Finance Companies (Establishment and
Regulation) Rules, 2003, it shall not be made unless such
fund has a minimum performance rating of “A” by a credit
rating company registered with the Commission under the
Securities and Exchange Ordinance, 1969 (XVII of 1969),
and the rating is maintained as such at the time of
investment;
(vi) that the closed-end fund shall provide the information
regarding the investment of the provident fund to the
Commission as the Commission from time to time
prescribe; and
(vii) that the Employees’ Provident Fund shall ensure that
investment in closed-end schemes registered under Non-
Banking Finance Companies (Establishment and
Regulation) Rules, 2003 shall be in conformity with the
above mentioned conditions.
6. Powers of Commission to relax rules.— Where the Commission is
satisfied that it is not practicable to comply with any of the condition or
conditions of these rules, in a particular case or class of cases, the
Commission may, for reasons to be recorded and subject to such
conditions as it may deem fit, relax any of the conditions specified in rules
3, 4 and 5 in the case of such company or class of companies.

7. Penalty.— Whoever fails or refuses to comply with or contravenes any of

the provisions of these rules, or knowingly and wilfully authorises or
permits such failure, refusal or contravention shall, in addition to any other
liability under the Securities and Exchange Ordinance, 1969 (XVII of
1969), be also punishable with fine not exceeding two thousand rupees,
and, in case of continuing failure, refusal or contravention to a further fine
not exceeding one hundred rupees for every day after the first during
which such contravention continues.

8. Repeal.— The Employees’ Provident Fund (Investment in Listed

Securities) Rules, 1996, are hereby repealed.

[8(12)PSPD/PD/2005]

( Mohammad Hayat Jasra )

Secretary